Lovell v. One Bancorp

• Decision Date: 31 March 1993
• Docket Number: Civ. No. 87-0296 P.
• Parties: Ann B. LOVELL, Individually and as Personal Representative of the Estate of John Lovell and Mary Campbell, Plaintiffs, v. The ONE BANCORP, et al., Defendants.
• Court: U.S. District Court — District of Maine

818 F. Supp. 412

Ann B. LOVELL, Individually and as Personal Representative of the Estate of John Lovell and Mary Campbell, Plaintiffs, v. The ONE BANCORP, et al., Defendants.

Civ. No. 87-0296 P.

United States District Court, D. Maine.

March 31, 1993.

COPYRIGHT MATERIAL OMITTED

Richard Poulos, John Campbell, Portland, ME, for plaintiff Ann Lovell and Mary Campbell.

Roger Putnam, Verrill & Dana, Portland, ME, for defendant One Bancorp and Maine Sav. Bank.

Rufus Brown, Harold Woodsum, Drummond, Woodsum, Plimptom & MacMahon, Portland, ME, for defendant Frederick Pape.

James St. Clair, Hale & Dorr, Boston, MA, for defendant Nancy Masterton and Masterton, Estate of.

Thomas Warren, Asst. Atty. Gen., Augusta, ME, for defendant H Dematteis.

GENE CARTER, Chief Judge.

MEMORANDUM AND ORDER GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

In this action Plaintiffs challenge the lawfulness of Maine Savings Bank's conversion from mutual to stock form in June 1984, and the administrative orders approving the conversion issued by the Maine Bureau of Banking. The parties filed numerous motions for summary judgment. (Docket Nos. 70, 72, 74, 75, 78). Finding both that there were certain questions of Maine law which might be determinative of the cause and that there were no controlling Maine precedents on those issues, this Court certified five questions of Maine law to the Supreme Judicial Court of Maine sitting as the Law Court, by order entered on February 5, 1991. (Docket No. 134).¹ The Law Court accepted the certification and issued its opinion answering three of the questions² in August, 1992. Lovell v. One Bancorp, 614 A.2d 56 (Me.1992) (Docket No. 147A). Defendants then filed renewed motions for summary judgment, which are now before the Court. (Docket Nos. 163, 161, 159, 0-0).³

Under Federal Rule of Procedure 56(c), summary judgment must be granted if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." As the Court of Appeals for the First Circuit has recently stated:

When, as here, the movant-defendant has suggested that competent evidence to prove the case is lacking, the burden devolves upon the nonmovant-plaintiff to "document some factual disagreement sufficient to deflect brevis disposition." ...

This burden is discharged only if the cited disagreement relates to a genuine issue of material fact.... "In this context, `genuine' means that the evidence about the fact is such that a reasonable jury could resolve the point in favor of the nonmoving party and `material' means that the fact is one that might affect the outcome of the suit under the governing law." ... This requirement has sharp teeth: the plaintiff "must present definite, competent evidence to rebut the motion." ...

Wynne v. Tufts University School of Medicine, 976 F.2d 791, 793 (1st Cir.1992) (citations omitted).

In presenting the case to the Law Court, this Court set forth the material undisputed facts established by the evidentiary record prepared by the parties in connection with their then-pending motions for summary judgment. Those facts, which still remain undisputed, and other undisputed material facts disclosed by the record are set forth below.

Maine Savings Bank was originally incorporated as the Portland Five Cent Savings Institution pursuant to Chapter 328 of the Private and Special Laws of Maine of 1859. Chapter 328 provided that the bank would be subject to the laws of Maine. Its passbooks and other documents governing accounts explained that they were subject both to Maine and federal law and to the bank's bylaws. Prior to its conversion to stock form in June 1984, Maine Savings Bank operated as a mutual financial institution within the meaning of the Maine Banking Code, 9-B M.S.R.A. § 111 et seq.

On December 30, 1983, Maine Savings Bank filed with the Maine Bureau of Banking an application to convert to stock form under 9-B M.R.S.A. § 344. The application included a Plan of Conversion which had been unanimously adopted by the Bank's Board of Trustees on December 15, 1983.

The Plan provided that Maine Savings Bank would convert to stock form and issue all of its stock to The One Bancorp, a holding company formed for the purpose of acquiring and holding the newly issued stock of Maine Savings Bank. The One Bancorp would then offer all of its stock for sale, first to eligible account holders, (account holders as of August 31, 1983, with aggregate balances in excess of $50.00) in a subscription offering. The price of the shares would be equal to the pro forma (that is, post conversion) fair market value of the stock, based upon an independent appraisal. Shares not subscribed for by eligible account holders would be offered, in descending order of priority, to other account holders, bank personnel, and the public, at the same pro forma fair market value. In connection with the transfer of Maine Savings Bank stock to The One Bancorp, the Plan also provided that The One Bancorp would allocate to Maine Savings Bank a portion of the conversion proceeds from the sale of stock of The One Bancorp sufficient to maintain the Bank's existing capital-to-asset ratio.

The Plan did not provide for the distribution of any cash, or any free or discounted stock, to existing or eligible account holders of the Bank. All shares of stock of The One Bancorp were to be sold to account holders, officers or employees, and the public, at a uniform price based upon an independent outside appraisal.

The Plan provided for the creation of a liquidation account, setting forth the priorities for the distribution of any net surplus of Maine Savings Bank in the event that the Maine Savings Bank liquidated while solvent within ten years following the conversion. The liquidation account was not a separate pool of funds, but an accounting memo entry of a contingent liability against the Bank. Each eligible account holder's interest in the liquidation account (the account holders' sub-account balance) would decline as withdrawals were made from his or her deposit account. The liquidation account would terminate in any event ten years after the conversion. The Plan also imposed restrictions on the dividends that could be paid by Maine Savings Bank to The One Bancorp. Dividends were limited for the three years following the conversion to 50% of Maine Savings Bank's earnings, and further limited so as to prohibit dividends that would reduce the stated net worth of Maine Savings to an amount below the balance of the liquidation account.

The Plan set limits on the purchase of The One Bancorp stock by any one person and by Maine Savings Bank officers and trustees. No person was permitted to acquire more than 5% of the stock issued in connection with the conversion. Trustees, officers, and their associates as a whole were not permitted to acquire more than 25% of the stock, except in the event of death. For a period of one year following the conversion, trustees and officers could not sell their stock. The Plan also authorized the Board of Directors to adopt a stock option and stock appreciation rights plan and an employee stock purchase plan following the conversion, subject to ratification by the common stockholders of The One Bancorp, and subject to a limit on the option plan of 7½% of the total shares sold in the conversion.

The substantive terms of Maine Savings Bank's Plan were essentially the same as those required by the Federal Home Loan Bank Board (FHLBB) regulations governing the mutual-to-stock conversion of FHLBB-regulated savings and loan associations and federally chartered mutual savings banks, 12 C.F.R. Part 563b, with the exception that the liquidation account established by Maine Savings Bank's Plan of Conversion was limited to a term of ten years. The Bureau of Banking had issued Bulletin 41 in August 1983 stating that these FHLBB regulations contained guidelines for the contents of a plan of conversion that could be used by Maine-chartered financial institutions which sought Bureau approval for a mutual-to-stock conversion plan. Bulletin 41 did not purport to be a judicially enforceable rule or regulation within the meaning of the Maine Administrative Procedure Act (MAPA), and the Bureau has never adopted rules or regulations governing the contents of a plan of conversion.

On January 6, 1984, the Maine Bureau of Banking notified Maine Savings Bank by letter that its application for approval to convert had been accepted for filing. In this letter the Superintendent instructed Maine Savings Bank to publish notice of the filing of its application in various newspapers, and specified the form and substance of the notice to be published. The Superintendent did not direct Maine Savings Bank to mail a copy of this notice to each of its eligible account holders. The notice stated, among other things, that interested parties could submit comments on Maine Savings Bank's application, and that a hearing would be held upon receipt of a bona fide and reasonable request by an interested party. Maine Savings Bank caused this notice to be published in various newspapers on January 20 and January 27, 1984, in accordance with the Superintendent's instructions. No written comments or requests for hearing on the application were ever received by the Bureau of Banking, and no hearing on the application was held.

On April 2, 1984, the Maine Bureau of Banking issued an order conditionally approving Maine Savings Bank's Plan of Conversion pursuant to 9-B M.R.S.A. § 344. The Superintendent of Banking believed that the purpose of allowing conversions was to raise capital. He would not have approved a conversion plan that would decrease the capital of the bank and did not think distribution of stock to account holders would be beneficial. The Superintendent also...